I know this gets asked a lot, but I just want to toss out my specific situation for some advice.
I'm married, 27 and my wife will be 26 next month. Last year our taxable income was 72,519.00, just into the 25% federal tax bracket. My income will be up maybe $5,000 from last year and my wife is on track to make about $20,000 more (she's a hair stylist and building her clientele) along with another $10,000 or so from a business investment (she's 10% owner in the salon). So with the extra income, we could easily be around $100,000 taxable income this year.
We spend about $5,250 a month ($63,000 a year), not counting savings and a couple of loans that will be paid off in the next couple of years. We would like to keep a similar lifestyle in retirement. Our retirement spending may actually go up as we'll want to travel more. This info is just to get an idea of what our income and tax rate may be in retirement, not to tell me we need to cut back on our spending. We are happy how we are.
Here's what we currently have for retirement/health savings:
-$458.33 each per month into a Roth IRA
-$275 a month into my wife's HSA (tax-deferred)
-8% of my paycheck goes towards my pension (tax-deferred)
-5% of my wife's paycheck goes into a Roth 401k
-4% of my paycheck goes into a 457 Plan (tax-deferred, starting this month to go along with my 4% raise)
A total of roughly $1,100 a month into Roth accounts and $950 a month into tax-deferred accounts.
My reasoning for a Roth account is that even if we pay 25% in taxes, we'll only be paying tax on our contributions and not the entire amount that our investments grow into. For the Roth IRA, I also really like the fact that our contributions can be withdrawn at any time for any reason. Especially that we could withdraw them in early retirement.
From what I've read on this forum, I'm pretty much coming out even whether I do a Roth or Traditional, because the Traditional will let me invest more now with any extra money going into a taxable account. I also don't need to be able to withdraw my contributions from a Roth IRA because I can do the conversion ladder.
So now after all the reading I've done here, I'm considering switching over the 401k and IRAs to traditional, tax-deferred accounts. Doing this will allow us to save more in the 401k and 457 Plan.
Is this a good call?
1st edit to add:
We have a few low interest loans we are paying off. As we pay those off, the money will be invested. Most likely, it will go into my 457 Plan. Within the next 3-4 years, I'd like to be maxing that out. Then any extra money after that could go into my wife's 401k or I could start my 401k with my work. We will also always want to invest a little into taxable savings every month to have money available as needed.
2nd edit to add:
My main retirement account with my work is a pension. I also have a 401k and of course the 457 Plan available to me. Neither get an employer match, as the employer matches the pension. My employer will also be offering Roth 401k and Roth 457 Plan later this year.
My wife gets a 4% match on her 401k when she deposits 5%. No additional match after that.